By Paul Sandle and Martinne Geller

LONDON (Reuters) - British American Tobacco (BATS.L) has offered to buy out U.S. cigarette maker Reynolds American Inc (RAI.N) in a $47 billion takeover that would create the world's biggest listed tobacco company with brands including Newport, Lucky Strike and Pall Mall.

The cash-and-stock deal would mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.

It would also give the British company - which has been bolstered by a strong share price since the country voted to leave the European Union - more premium brands such as Camel, which it can sell in countries like Russia and Turkey where demand for Western cigarettes is still growing.

The marriage would also unite each company's efforts in the fast-developing world of e-cigarettes, which the companies say are less dangerous than smoking - a habit that kills about six million people worldwide each year.

A Reynolds takeover by BAT, which already owns 42 percent of the U.S. group, has long been seen as part of an inevitable wave of global consolidation in a mature industry. Yet the timing, less than three weeks before a U.S. presidential election, was unexpected.

"This proposed deal manages to be both entirely expected and a surprise," Euromonitor analyst Shane MacGuill said.

The completion of last year's purchase by Reynolds of Lorillard and the current relative valuations of the two companies' shares were the main triggers, two sources close to the situation told Reuters.

They referred to a gain in BAT's stock since Britons opted for Brexit in June and a fall for Reynolds, which brought their trading multiples closer together. However in dollar terms, BAT's share performance is less pronounced.

"This is simplifying the structure by taking out the majority stake BAT doesn't already own," one source said, adding: "It's always been on the cards."

After the Brexit vote, shares in BAT soared to all-time highs as investors bet the falling pound would lift the value of overseas revenue for UK-based companies like BAT, which do most of their business outside the country.

The pound has lost about a fifth of its value against the dollar since the EU referendum on June 23, pushing up the cost of the cash element of overseas purchases by UK-based firms.

But between the referendum day and Thursday this week, when BAT decided to act, its shares had gained 12 percent, while Reynolds's stock was down 7 percent. This has increased the value of the share element of the offer.

With little geographic overlap and therefore limited antitrust issues, this deal is also a lot simpler than another oft-speculated deal - that BAT would take over British rival Imperial Brands (IMB.L), the source added.

Imperial shares were up 3 percent, with one analyst saying a general reignition of consolidation in the industry may be outweighing the fact that BAT is now unlikely to bid for its rival in the near term.

CASH AND STOCK

Reynolds, based in Winston-Salem, North Carolina, acknowledged receipt of the unsolicited offer, which a different source said was decided on last night. It was made public immediately, as required by U.S. securities regulators in cases where the buyer is a big shareholder.

Reynolds said it would review the offer and respond in due course.

The British group said its offer valued Reynolds's shares at $56.50, of which $24.13 would be in cash and $32.37 would be in BAT shares, representing a premium of 20 percent over the closing price of Reynolds stock on Thursday.

The total price for the remaining 57.8 percent of Reynolds would be $47 billion, of which approximately $20 billion would be in cash and $27 billion in BAT shares, BAT said.

BAT Chief Executive Nicandro Durante, a long-distance runner who hails from Sao Paolo, Brazil, said the deal would create a U.S. market leader and the world's largest listed tobacco company by net turnover and operating profit.

"The strategic rationale makes perfect sense," Guy Ellison, an analyst at Investec Wealth & Investment, said. He cited a BAT pivot toward the large U.S. market, whose profit pool is protected by high barriers to entry, and improved scale in vapor products like e-cigarettes, which all big tobacco companies are investing in to offset declines in smoking.

BAT said the deal would add to earnings in the first year after closure and estimated cost savings of about $400 million.

COMING TO AMERICA

The stock's strength is also due to geopolitical uncertainty in recent months leading investors to seek out stable, dividend-yielding stocks like tobacco and other consumer staples.

Shares in Reynolds fell to a 12-month low on Wednesday of $43.38 after its third quarter earnings were 6 percent short of market forecasts, Jefferies analysts said, on the back of a 1.5 percent fall in domestic cigarette volumes.

BAT shares, which reached a high of 51.35 pounds in July, were trading up 2.4 percent at 49.20 pounds at 1308 GMT. If successful, the takeover would be one of the biggest this year globally.

BAT stopped operating in the United States in 2004, when it merged its U.S. subsidiary Brown & Williamson with R.J. Reynolds to form Reynolds American.

Due to a series high-profile U.S. lawsuits against tobacco firms, the big four have all limited their exposure to the market. Marlboro maker Phillip Morris International (PM.N), the world leader, was spun off from the U.S. business Altria (MO.N) in 2008.

Yet several cases have now been settled, which has led analysts to speculate that international players could return. Imperial Brands waded into the U.S. market last year with its $7 billion purchase of certain brands from Reynolds to ease the $25 billion purchase of Lorillard.

Smoking rates in the United States and other western markets are declining due to increasing health consciousness, and greater regulation and taxes. Yet their addictive nature and high profit margins make them a profitable business.

MacGuill said he expects the Reynolds deal to be followed in the coming years by the reunification of Philip Morris and Altria to create two huge players in global tobacco.

BAT is being advised by Centerview, Deutsche Bank and UBS.

BAT also said on Friday it had performed well in the first nine months of the year, raising both revenue at constant rates of exchange and cigarette volumes.

Year-to-date revenue grew 8.1 percent at constant rates of exchange, it said, as its biggest brands sold 9.8 percent more cigarettes.

(Additional reporting by Pamela Barbaglia; editing by Guy Faulconbridge and David Stamp)